2000 (2) Kathmandu - Globalisation and Developing Countries

Note: This policy statement was issued on the 19th of May 2000 during the 60th CACCI General Council Meeting in Kathmandu, Nepal

1. The Confederation of Asia Chambers of Commerce and Industry (CACCI) continues to support trade and investment liberalization, which has contributed greatly to the expansion and integration of the world economy. Asian nations have especially benefited from this globalization. Temporary setbacks in some Asian nations appear to have been more or less overcome, and these nations are expected to resume their rapid economic expansion.

2. However, the benefits of globalization have not brought prosperity and development to the same degree to all Asian nations, and to all sectors within these nations. The advance of information technology may even serve to accelerate these disparities (the so-called digital divide). Therefore, governments and business in the region should cooperate to deal with the economic and social problems brought about by globalization while taking care not to reverse the basic direction of development that has been so successful in the past.

3. CACCI believes that, in principle, liberalization should bring about a reallocation of resources to the most efficient sectors of the economy. We believe, however, that this process, if not effectively managed, can present challenges for social and political stability, as the effects of the adjustment policies undertaken by Asian economies in response to the recent financial crisis have demonstrated.

4. Governments have a substantial role to play in facilitating globalisation. Policy settings must be adaptable, consistent, transparent, reinforcing competitive markets and emphasising market-oriented measures. Sound economic policies must be accompanied by balanced and transparent laws and regulations.

Corruption in all its forms undermines broad and soundly based economic development, and its elimination should be a high priority for all governments. At the same time, democracy and good governance can help to reinforce competitive, market mechanisms.

5. International business can also play a constructive role in assisting developing countries to realise the benefits of globalisation. Global businesses, whether large or small, bring many benefits to host countries, particularly developing nations, including greater access to foreign capital, technology and export networks, through which they generate flow-on benefits to local firms and people.

6. Research by the Organisation for Economic Co-operation and Development (OECD) shows foreign firms generally create new jobs faster, and pay wages higher than, domestic firms. Other benefits include superior training and career opportunities for local people. Global enterprises also play a valuable role in promoting the upward, not the downward, convergence toward world standards of labour and environmental practices in developing countries.

7. Developed countries, both business and government, can constructively assist developing countries to build local capacities to realise the dividends of globalization. For the least developed countries, this can include targeted foreign aid programs which help those nations build fundamental capacities for self-sustained economic growth and development.

For other developing countries, this should also include developed countries widening and deepening efforts to liberalise domestic and international markets for trade and investment (for example by dealing with tariff peaks, non-tariff barriers and unjustifiable subsidies), so emerging economies can better realize their competitive advantages in trade and commerce.

8. An ambitious and comprehensive multilateral round of trade and investment liberalisation negotiations, would assist developed countries to realise the dividends of globalisation by strengthening the binding rules of the global trading system.

The benefits of freer trade for developing countries are substantial. The OECD has estimated eliminating tariff barriers alone to trade would raise world economic growth by 3 per cent per annum, with even larger gains accruing to developing countries both in Asia and Africa. Those developing countries which have embraced economic liberalisation and openness have enjoyed economic growth rates much faster than those who have maintained closed or protectionist policies; a rate of return double that for comparable developed countries.

9. International agencies, both governmental and private sector, can usefully provide developing countries with advice on pro-market, efficiency-enhancing and outward-oriented commercial and economic policies. Sound education, training, health, and public finance and governance policies and structures are necessary elements of such policy frameworks. Adjustment assistance, where legitimate and necessary, should help position developing economies to achieve self-sustained economic growth and development, and not to create ongoing welfaredependencies.

10. In view of these considerations, CACCI therefore urges governments in the region to undertake the following measures in support of capacity-building:

a. Governments should ensure that all policies are consistent with a more liberal economic regime and promote the rapid growth of competitive sectors. Specifically, policies and policy biases that hamper the development of potentially competitive sectors, such as policies biased against the agriculture sector in developing economies and policies that encourage domestic cartels and monopolies, should be corrected. To achieve this, governments should review all relevant policies that have an impact on the economy, and most especially, on those sectors that would be affected by trade and investment liberalization. These should include tariff, trade and industrial policy; policies affecting competition and fair business practices; direct and indirect subsidies; taxation; and policies governing the provision to all economic sectors of key services such as finance, transportation, telecommunications, energy and retail trade.

b. Governments should ensure that infrastructure spending is focused on areas that would produce the greatest benefit, most especially in terms of encouraging investment in globally competitive sectors that could absorb large numbers of human resources and contribute significantly to the success of structural adjustment. An appropriate and effective policy framework should be provided to encourage greater private sector participation in physical infrastructure development. Social infrastructure, especially education, health and skills development is also important, as will be sustainable environmental management.

c. Governments should formulate and implement policies that would promote the growth and development of small and medium enterprises (SMEs). These include policies that address issues related to SMEs’ access to finance, markets, technology and information; policies and regulations that encourage the establishment and operation of enterprises, with a view to reducing red tape; policies that promote more efficient provision of key services, with a view to reducing the incidence of monopolies and cartels in key industries and services; and labor policies that would provide a more deregulated and favorable environment for SMEs to thrive. Where needed, governments should establish mechanisms to directly aid SMEs in raising capital.

d. Governments should promote and encourage programs that address weaknesses in human resources development. Governments should provide effective policy frameworks for expanded participation of the private/business sector in human resources development, especially in providing the work force with skills that correspond to the direction of structural changes in the economy.

e. Within the framework of APEC, especially its economic and technical cooperation (ECOTECH) framework, the various economies of the region should intensify collaboration in capacity-building focused on enabling the less-developed member economies to develop potentially competitive sectors more rapidly as they liberalize their trade and investment policies. Particularly, APEC should provide a mechanism for pooling resources and expertise in the areas of human resources and infrastructure development, as well as in the development of the agriculture and fisheries sectors in the less advanced economies.

11. CACCI reiterates its support for globalization and its conviction that free and open markets provide the most conducive environment for development and prosperity. We believe, however, that the transition from the present situation in our region’s developing economies is a complex economic and political process that needs to be managed carefully and prudently. We believe that it is important during this transition to support the process of liberalization by putting in place measures that will enhance its benefits, while facilitating adjustment, especially for the most vulnerable sectors.

12. CACCI members continue to support the opening of new negotiations in the WTO (the New Round). However, WTO members, especially among developed economies, should cooperate to improve transparency in the negotiating process. A review of the implementation of Uruguay Round commitments could also usefully be undertaken. They should give top priority to provide concrete benefits to developing nations in the negotiations. The WTO should also accelerate the admission procedures of those Asian nations seeking membership.

13. Recognising the above, CACCI and its national/economy member Chambers can help to make globalisation work for the benefit of developing countries, and most importantly their citizens, by forcefully articulating these views in relevant international fora, and to their respective governments.

2000 (2)

Note: This policy statement was issued on the 19th of May 2000 during the 60th CACCI General Council Meeting in Kathmandu, Nepal

1. The Confederation of Asia Chambers of Commerce and Industry (CACCI) continues to support trade and investment liberalization, which has contributed greatly to the expansion and integration of the world economy. Asian nations have especially benefited from this globalization. Temporary setbacks in some Asian nations appear to have been more or less overcome, and these nations are expected to resume their rapid economic expansion.

2. However, the benefits of globalization have not brought prosperity and development to the same degree to all Asian nations, and to all sectors within these nations. The advance of information technology may even serve to accelerate these disparities (the so-called digital divide). Therefore, governments and business in the region should cooperate to deal with the economic and social problems brought about by globalization while taking care not to reverse the basic direction of development that has been so successful in the past.

3. CACCI believes that, in principle, liberalization should bring about a reallocation of resources to the most efficient sectors of the economy. We believe, however, that this process, if not effectively managed, can present challenges for social and political stability, as the effects of the adjustment policies undertaken by Asian economies in response to the recent financial crisis have demonstrated.

4. Governments have a substantial role to play in facilitating globalisation. Policy settings must be adaptable, consistent, transparent, reinforcing competitive markets and emphasising market-oriented measures. Sound economic policies must be accompanied by balanced and transparent laws and regulations.

Corruption in all its forms undermines broad and soundly based economic development, and its elimination should be a high priority for all governments. At the same time, democracy and good governance can help to reinforce competitive, market mechanisms.

5. International business can also play a constructive role in assisting developing countries to realise the benefits of globalisation. Global businesses, whether large or small, bring many benefits to host countries, particularly developing nations, including greater access to foreign capital, technology and export networks, through which they generate flow-on benefits to local firms and people.

6. Research by the Organisation for Economic Co-operation and Development (OECD) shows foreign firms generally create new jobs faster, and pay wages higher than, domestic firms. Other benefits include superior training and career opportunities for local people. Global enterprises also play a valuable role in promoting the upward, not the downward, convergence toward world standards of labour and environmental practices in developing countries.

7. Developed countries, both business and government, can constructively assist developing countries to build local capacities to realise the dividends of globalization. For the least developed countries, this can include targeted foreign aid programs which help those nations build fundamental capacities for self-sustained economic growth and development.

For other developing countries, this should also include developed countries widening and deepening efforts to liberalise domestic and international markets for trade and investment (for example by dealing with tariff peaks, non-tariff barriers and unjustifiable subsidies), so emerging economies can better realize their competitive advantages in trade and commerce.

8. An ambitious and comprehensive multilateral round of trade and investment liberalisation negotiations, would assist developed countries to realise the dividends of globalisation by strengthening the binding rules of the global trading system.

The benefits of freer trade for developing countries are substantial. The OECD has estimated eliminating tariff barriers alone to trade would raise world economic growth by 3 per cent per annum, with even larger gains accruing to developing countries both in Asia and Africa. Those developing countries which have embraced economic liberalisation and openness have enjoyed economic growth rates much faster than those who have maintained closed or protectionist policies; a rate of return double that for comparable developed countries.

9. International agencies, both governmental and private sector, can usefully provide developing countries with advice on pro-market, efficiency-enhancing and outward-oriented commercial and economic policies. Sound education, training, health, and public finance and governance policies and structures are necessary elements of such policy frameworks. Adjustment assistance, where legitimate and necessary, should help position developing economies to achieve self-sustained economic growth and development, and not to create ongoing welfaredependencies.

10. In view of these considerations, CACCI therefore urges governments in the region to undertake the following measures in support of capacity-building:

a. Governments should ensure that all policies are consistent with a more liberal economic regime and promote the rapid growth of competitive sectors. Specifically, policies and policy biases that hamper the development of potentially competitive sectors, such as policies biased against the agriculture sector in developing economies and policies that encourage domestic cartels and monopolies, should be corrected. To achieve this, governments should review all relevant policies that have an impact on the economy, and most especially, on those sectors that would be affected by trade and investment liberalization. These should include tariff, trade and industrial policy; policies affecting competition and fair business practices; direct and indirect subsidies; taxation; and policies governing the provision to all economic sectors of key services such as finance, transportation, telecommunications, energy and retail trade.

b. Governments should ensure that infrastructure spending is focused on areas that would produce the greatest benefit, most especially in terms of encouraging investment in globally competitive sectors that could absorb large numbers of human resources and contribute significantly to the success of structural adjustment. An appropriate and effective policy framework should be provided to encourage greater private sector participation in physical infrastructure development. Social infrastructure, especially education, health and skills development is also important, as will be sustainable environmental management.

c. Governments should formulate and implement policies that would promote the growth and development of small and medium enterprises (SMEs). These include policies that address issues related to SMEs’ access to finance, markets, technology and information; policies and regulations that encourage the establishment and operation of enterprises, with a view to reducing red tape; policies that promote more efficient provision of key services, with a view to reducing the incidence of monopolies and cartels in key industries and services; and labor policies that would provide a more deregulated and favorable environment for SMEs to thrive. Where needed, governments should establish mechanisms to directly aid SMEs in raising capital.

d. Governments should promote and encourage programs that address weaknesses in human resources development. Governments should provide effective policy frameworks for expanded participation of the private/business sector in human resources development, especially in providing the work force with skills that correspond to the direction of structural changes in the economy.

e. Within the framework of APEC, especially its economic and technical cooperation (ECOTECH) framework, the various economies of the region should intensify collaboration in capacity-building focused on enabling the less-developed member economies to develop potentially competitive sectors more rapidly as they liberalize their trade and investment policies. Particularly, APEC should provide a mechanism for pooling resources and expertise in the areas of human resources and infrastructure development, as well as in the development of the agriculture and fisheries sectors in the less advanced economies.

11. CACCI reiterates its support for globalization and its conviction that free and open markets provide the most conducive environment for development and prosperity. We believe, however, that the transition from the present situation in our region’s developing economies is a complex economic and political process that needs to be managed carefully and prudently. We believe that it is important during this transition to support the process of liberalization by putting in place measures that will enhance its benefits, while facilitating adjustment, especially for the most vulnerable sectors.

12. CACCI members continue to support the opening of new negotiations in the WTO (the New Round). However, WTO members, especially among developed economies, should cooperate to improve transparency in the negotiating process. A review of the implementation of Uruguay Round commitments could also usefully be undertaken. They should give top priority to provide concrete benefits to developing nations in the negotiations. The WTO should also accelerate the admission procedures of those Asian nations seeking membership.

13. Recognising the above, CACCI and its national/economy member Chambers can help to make globalisation work for the benefit of developing countries, and most importantly their citizens, by forcefully articulating these views in relevant international fora, and to their respective governments.